analysis for CAC included in appendix to body of due diligence report, using Excel for the ratio analysis is recommended. Prepare common-size financial statements for CAC. as this may assist in identifying accounts that are unusual in comparison to prior years and may suggest areas warranting further analysis and evaluation. Include common size nancial statements (balance sheet and income statement) in appendix to body of due diligence report, using Excel for the common size statements is recommended. Discussion questions to answer in nal due diligence report: a. Calculate and interpret the change in CAC's gross margins (excluding service revenue)? Has CAC's gross margins increased or declined dramatically from 2011 to 2012. If so, what could explain this dramatic change? b. Calculate and interpret the change in CAC's net profit margin? Has CAC been profitable from 2010 through 2012? Has CAC generated positive operating cash flows from 2010 through 2012? Compare these observations to the changes in CAC's financial position [e.g., ratio of liabilities to assets) over the past three years. Are your observations of net income, cash ow, and changes in financial position consistent? Should these observations be reported to Mr. Hasting? c. How has CAC's accounts receivable changed over the past three years? Is there qualitative or quantitative evidence suggesting that CAC may have difficulty collecting the accounts receivable currently reported on the balance sheet? d. lGiven above changes in accounts receivable, what changes would you have expected to see in the Allowance for Doubtful Accounts? Is the change in die Allowance for Doubtful Accounts between 2011 and 2012 consistent with the change in accounts receivable? Does evidence suggest (SAG has not adequately allowed for bad debts in 2012? iNhat would be the financial and ratio impact if CAC were to increase its estimate of bad debts in 2012